If FM Arun Jaitley‘s last two Budgets were about giving evaders a chance to come clean by paying additional tax and penalty, his fourth Budget has focused on introducing measures to squeeze unaccounted money and discourage the use of cash across the economy — from a ban on cash transactions of over Rs 3 lakh to restricting tax deductions if you make cash donations to charitable institutions.
In addition, the government has decided to launch an offensive against those who have fled the country by arming itself with legal powers to confiscate assets of persons such as Vijay Mallya, Lalit Modi or even Dawood Ibrahim. Although Jaitley promised constitutional safeguards against potential misuse, it is not clear if the law will apply retrospectively.
In line with the recommendations of the Supreme Court appointed Special Investigation Team on black money, the government proposes to bar cash payments of over Rs 3 lakh to a person in a day. The limit will apply to single transactions, say purchase of a high-end watch or jewellery, or an event, such as payments to a wedding planner or property broker. For any breach, the penalty will be equal to the value of the payment, unless it can be proved that there were “good and sufficient reasons” for the cash transaction.
Perhaps the biggest change is in political funding, where the limit on anonymous cash donations has been slashed from Rs 20,000 to Rs 2,000; names of donors who breach the ceiling will need to be disclosed by political parties. Any donation above Rs 2,000 will have to be made by cheque or through electronic means.